Importance of Construction to the National Economy

5 pages
1150 words
University of California, Santa Barbara
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The construction industry is one of the principal focuses of the United Kingdom government policy. This is vast as a result of the importance of construction to the national economies taking into consideration of the manufacturing building products, components and equipment, and the various professional services that are provided by surveyors, architects, engineers and the property managers. Statically, the share of the total annual economic activity which is attributed to construction in fully industrialized countries is more than 12 percent of business in average. Ideally, apart from the significant impact of construction to the economic flow, it has lead to raising the living standards and the capability of the society to produce other services and goods hence its associated to the production f the investment products. Since European Union construction counts for fifty percent of the general investment products, construction has proved to have a significant impact on the level of employment because it is more of labor intensive than the rest of sectors, with European employer accounting for nearly 1.5 million employees being represented in the construction industry.

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Making a comparison of the construction industry to another area of the national economy in the United Kingdom, it has been realized that construction indirectly affects and create support to activities in manufacturing, financial, retail, wholesale, service and the residential sector. Concentrating on the short term benefits, the construction industry in the United Kingdom has one of the largest output multipliers among other areas that are modeled for government support, making it be one of the most efficient ways of stimulating the economy in general. Additionally, the construction industry is a driver of growth in another development sector of the economy due to its heavy reliance on a different and extended supply chain. To be specific plastic products, metal products, mining, rental of machinery, structural clay products, banking and finance and other business services directly benefits construction hence resulting in increasing performance in the construction industry.

The narrow and broader definition of construction

The narrow definition of construction has been statistically influenced through a reflection of the estimated activity of firms that performs the construction and maintenance of the building. The narrow definition through statistics is restricting construction to a business that is undertaking onsite activities that involve maintaining and building of infrastructure. Contrary, the broader definition of construction is elaborated by the share of the total annual economic activity that is wholly attributed to construction process by the official statistics in a country that is fully industrialized, more than twelve percent with a standard range of seven to ten percent range.

Additionally, in providing the narrow and the broader definition of construction, the relationship that exists between them can be exploited to bring the exact comparison. The relationship that exists between the construction industry and other sector and the national economy holds the general comparison. Construction from a narrow definition focus on the direct impact that construction is being associated with, it involves the construction process, and the immediate impact construction has on the development of different industries. In the general definition, construction is viewed in the case where construction indirectly supports and affects activities in manufacturing, financial, whole sale, residential and the public service sector. Contrast to the narrow definition where construction impact activities directly .notable, the direct and the indirect relationship portrays significant impact for the management of the macro economy.

The size and the nature of construction output

Construction in the United Kingdom is one of the largest sectors of its economy, and construction as a whole is contributing to up to ninety billion pounds to the economy of United Kingdom. Relatively, in value addition, construction runs over two hundred and eighty thousand businesses that are covering almost 2.93 million jobs which are equal to the ten percent of UK employment population. The major participant involved in the construction industry can be classified in groups like construction consultants, clients, contractors and subcontractors, plant hirers, building merchants and professional organizations. Considering the nature of demand for construction works and uses, the national statistics indicate that the current character has shown serious demand for construction in the United Kingdom. The new work is representing sixty-four percent of the industry as a whole with the total output for housing representing thirty-3 percent of all the jobs, Additionally, considering the production of constructions that have been done in the past housing and commercial have recorded the largest construction sector with most projects going for less than six months. Forty-four percent of all the new work has been taking place in the southern part of the United Kingdom.

Considering the past performance, the construction statistics indicates that the construction has been majoring on new works and general repairs and maintenance, with the new work involving infrastructure, private practices that include commercial and industrial works. In the sector of redress, statistics shows that repair focuses both the housing in public and private sectors. Focusing on statistical data the United Kingdom have been experiencing fall of output since the pre-2008 recession with the level being driven by falling private housing and private commercial building which have shown the decline by forty and thirty the percent since the year 2002. However, the public nonresidential and the infrastructure have experienced a sharp increase after 2007 with a sharp fall in support output during 2012 and a decline in the public nonresidential subcontractors showing a continuous decline in 2010.

Consideration of determinant of construction demand

Considering the determinant of construction demand, construction is necessary for with its contribution being realized to take the lion share of economic activities in the United Kingdom; the construction market covers the infrastructures, factories, offices and different houses. In most developing countries, construction demand tends to be larger than the one in developed countries. When an economy has improved the request for construction tends to be small with the greater need going to a sector of repair and maintenance. In the UK most constructions are now deviating to the repair and maintenance sector in Western Europe receiving an increase in construction demand of up to 1.5 percent on average period f 200 to 2004. The growth experienced exceeded the output growth by 0.5% per year for every five years. The newly independent states of Kazakhstan, Republic of Moldova and Tajikistan receiving decline in demand.

Description of the characteristics of the structures of the construction industry

The structure of a construction industry involves the key participants that are responsible for controlling the whole process; they include clients, material producers, building merchants, construction consultants, and plant hires. The structures consultant plays a significant role in the design process; they frequently involve engineers, quantity survey, and architects. Finally, the clients are the individuals and organizations who commission the building; they can require the owner, the public, private, investors and the developers. With the contract and subcontractors involving those who are contracted with the mandate of carrying out the actual construction work, they include build contractors, principal contractors, suppliers and subcontractors.

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